CLA-2 OT:RR:CTF:TCM H026666 JER
Ms. Marcela B. Stras, Esq.
Baker & Hostetler, LLP
Washington Square
1050 Connecticut Avenue, N.W., Suite 1100
Washington, DC 20036-5304
RE: Country of Origin and Marking of the Model 2000 Digital Multimeter
Dear Ms. Stras:
This is in response to your letter dated April 22, 2008, on behalf of your client Keithley Instruments, Inc., requesting a binding ruling concerning the country of origin and marking requirements of certain electrical and test measurement equipment described as the Model 2000 Digital Multimeter under the Harmonized Tariff Schedule of the United States (“HTSUS”). In reaching our decision, additional consideration was given to your supplemental letter, dated July 8, 2008.
FACTS:
According to the manufacturer, the Model 2000 is a 6 ½ digit Digital Multimeter (“DMM”). A DMM is described as a versatile piece of electrical test and measurement equipment which measures different electrical characteristics such as: voltage, resistance and amps. Applications of the DMM are said to include: studying the relationship between electrical parameters, troubleshooting an electrical circuit as well as its use by test engineers for use on test stands in manufacturing or for quality assurance in calibration of electronic products. The sub-assemblies which make up the DMM include: one analog printed circuit board, one connector printed circuit board, a display printed circuit board, a front panel, one mechanical harness and one digital board harness. The finished DMM is assembled in the United States following the procurement and production of several different components and sub-assemblies. The manufacturing process, according to your submission, is as follows:
Step 1
In Step 1, the manufacturer procures raw materials which consist of hundreds of electronic components (resistors, capacitors, diodes, integrated circuits, connectors, switches, relays) and custom components (raw printed circuit board, plastics, sheet metal, transformers). These parts have various countries of origin.
Step 2
In Step 2, the manufacturer or an approved supplier produces the sub-assemblies which go into the final product. The analog
Printed Circuit Board (“PCB”), the LCD display PCB assembly and the Front Panel PCB assembly are all assembled in Malaysia. Approximately 32% of the components used to make the printed circuit board assemblies stem from the U.S. while the remaining 68% originate from seven different countries. Assembly of the PCBs requires a complex set-up of components. The equipment used to place the components is equally sophisticated.
The front panel, mechanical harness and digital board harness are assembled in the United States. General assembly skills are needed for each of the manufacturing processes.
Step 3
In Step 3, the manufacturer puts the sub-assemblies together into a metal chassis to create an electrically functional unit in the U.S. You state that “none of the sub-assemblies are functional prior to final assembly.” Hence, combining all of the sub-assemblies is required for each of the individual sub-assemblies to function. This process requires hand operation performed by trained mechanical assemblers.
Step 4
In Step 4, the final test and calibration of the finished product is conducted in the U.S. Calibration of the unit involves the use of “higher grade assembly personnel” in conjunction with an audit process conducted by metrology technicians.
ISSUE:
Whether the assembly of the various components to create a digital multimeter constitutes a substantial transformation, whereby they are deemed products of the United States and are thereby excepted from the country of origin marking requirements.
LAW & ANALYSIS
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. § 1304), provides that, unless excepted, every article of foreign origin imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article. By enacting 19 U.S.C. § 1304, Congress intended to ensure "that the ultimate purchaser would be able to know by inspecting the marking on the imported goods the country of which the goods are the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will." United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302 (1940).
Section 134.1 (b), CBP Regulations (19 C.F.R. 134.1(b)), defines “country of origin” as the country of manufacture, production or growth of any article of foreign origin entering the U.S. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin” within the meaning of the marking laws and regulations.
For country of origin and marking purposes, a substantial transformation of an article occurs when the manufacturing process results in an article having a name, character, or use differing from that of the article before the processing. See United States v. Gibson-Thomsen Co. Inc., 27 CCPA 267 (1940); see also 19 C.F.R §134.35. However, if the manufacturing or combining process leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff'd, 702 F.2d 1022 (Fed. Cir.1983). Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the "country of origin" within the meaning of the marking laws and regulations. Where it is determined that substantial transformation has occurred, the imported components are excepted from marking pursuant to 19 C.F.R. §134.35.
In determining whether the combining of parts or materials constitutes a substantial transformation, the issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. United States, 573 F. Supp. 1149 (CIT 1983), aff'd, 741 F.2d 1368 (Fed. Cir.1984). Assembly operations which are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. See C.S.D. 85-25, 19 Cust. Bull. 844 (1985). However, the issue of whether a substantial transformation occurs is determined on a case-by-case basis.
You argue that sub-assemblies undergo a substantial transformation as a result of assembly operations performed in the U.S. You further argue that the PCB assemblies undergo a change in tariff provision once integrated with the final product. Specifically, you contend that if imported separately the PCB assemblies are classifiable under subheading 9030.90.6800, HTSUS, as printed circuit assemblies of instruments and apparatus of subheading 9030.82, HTSUS, while following the final assembly they are classifiable under subheading 9030.90.8822, HTSUS, as printed circuit assemblies for articles of subheading 9030.32 (Multimeters with a recording device). While we agree, we note that it is a well established principle of customs law that tariff classification is not determinative of whether a substantial transformation has occurred.
In HQ W562827, dated November 5, 2003, we determined that PCB assemblies used in the manufacturing of digital controllers underwent a substantial transformation. In HQ W562827, the finished controllers were comprised of PCB assemblies, metal chassis parts, an outer housing and a fluorescent display. The PCBs in that ruling had no other function except to serve as a single component for the finished digital controller.
In the case at issue, as a result of combining the materials, the PCB sub-assemblies lose their identity and become an integral part of the finished DMM and have a use differing from that of uncombined PCB sub-assemblies. Like the combined PCBs in HQ W562827, these articles are housed in a metal chassis combined with other articles to function as a single unit.
Similarly, in HQ 734045, dated October 8, 1991, CBP considered whether the final assembly of computers substantially transformed the individual components and sub-assemblies. In HQ 734045, CBP found that combining the sub-assemblies and other components in the manufacture of computers was the creation of a new article of commerce separate and distinct from its individual components that composed it.
For purposes of substantial transformation, we find that Digital Mulitmeter is a single article and not merely a collection of individual components. The individual components and PCB sub-assemblies are permanently attached to each other and function together as a single unit. The combined sub-assemblies and components together form a new article with a new identity and use different and distinct from their identity and use prior to the final assembly operation performed in the U.S. As such, when applying Belcrest and Uniroyal it is clear that the operations performed in the U.S. are meaningful and that the PCB assemblies become integral parts of the final product which are solely and principally used as a part of the subject merchandise.
Based on the totality of the circumstances and consistent with the CBP rulings cited above, we find that the various imported components (individual parts and sub-assemblies) are substantially transformed as a result of the operations performed in the United States to produce the Digital Multimeter. Therefore, the country of origin is the United States.
Section 134.35, CBP Regulations (19 C.F.R. 134.35), implementing the principle of Gibson-Thomsen in addition to the principle stated previously, provides that the manufacturer or processor in the United States who converts or combines the imported article into the different article will be considered the “ultimate purchaser” of the imported article within the contemplation of section 304(a), Tariff Act of 1930, as amended (19 U.S.C. 1304(a)), and the article shall be excepted from marking. Only the outermost containers of the imported articles shall be marked in accord with this part. Accordingly, the DMM need not be marked. Only the outermost container need be marked with the country of origin of the foreign components.
Lastly, you inquire whether the Model 2000 DMM qualifies as being “Made in the United States" and if such is an appropriate marking for this merchandise. The use of the phrase "Made in U.S.A." or any marking similar to "Made in" when followed by the United States is within the jurisdiction of the Federal Trade Commission (“FTC”). Therefore, you should contact the FTC regarding the appropriateness of the use of this phrase. The FTC address is: Federal Trade Commission, Bureau of Consumer Protection, Division of Enforcement, 6th and Pennsylvania Avenue, N.W., Washington, D.C. 20508.
HOLDING:
Based upon the specific facts of this case, we find that the imported components of the DMM are substantially transformed as a result of the described manufacturing operations performed in the United States. The country of origin of the DMM is the United States. Pursuant to 19 C.F.R. §134.35, only the outermost container of the imported foreign components shall be marked to indicate the country of origin of the article.
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Gail A. Hamill, Chief
Tariff Classification & Marking Branch